A possibly pivotal Friday
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Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hello, everyone. It is Friday, 9th of May, 2025, and I'm going to try out a new format here. For those of you who have been listeners of the Saxo Market Call for some time,

Back in the old days, we used to attempt to do a daily format. And while I can't promise that we're going to go back to a daily format, I would like to do slightly more frequent updates and perhaps alternate with occasional shorter podcasts like the one I'll be doing today, which is more of a quick market update, no slide deck and a few thoughts. I think it's especially important on days like today where there's a lot going on and we're unable to prep a longer podcast.

So would really appreciate your feedback if you have any for this plan to do some shorter ones once in a while. Anything else you'd like to hear, just reach out to us, marketcallatsaxobank.com. That's marketcallatsaxobank.com. So I think a lot of moving parts here as we're looking ahead to the weekend and we've come so far in terms of this sort of turnaround from the Liberation Day tariff announcements on April 2nd, the impact hitting the market on April 3rd.

We've come full circle in many ways. I just noticed one of the high yield or corporate credit spreads I track has gone almost entirely full circle from where it was the day before Liberation Day. Equities have largely done so as well. And we're really at some critical levels here in this equity market. I'm glad that we've been pointing out the NASDAQ 100, 200-day moving average.

It was tested yesterday, and that test failed. We've got some nice doji candlesticks, all the uncertainty stuff you like there and those Japanese candlestick formations. On the SPX, a similar one. Didn't quite approach the 200-day moving average there, but a very nice candlestick for at least establishing risk-reward levels for bears to get involved again with a long-legged doji, arguably, or even a shooting star doji. It's sort of a hybrid candlestick formation there.

Um, uh, for the S and P 500, the risk symptom was broadly strong yesterday on anticipation that we're going to get this US UK trade deal. It's a established the template that we're going to see a big, uh, or, you know, lowering of all these tariffs. And, um,

And this will lead to greater things, I guess, and clearly uncertainty, of course. So much is priced in, I think, at these levels as we've been talking about. But let's look at some of the particulars of this deal. First of all, I think, as Michael Every characterizes it, and I fully agree,

This type of dealmaking completely undermines the entire WTO former world order. And the fact that the UK deals or sort of agrees to this kind of deal is just a recognition that the US is ripping up the playbook here for how the world works.

And I think that's an important precedent, especially as you look towards Europe, which will be trying to lean back on these old institutions, these old ways of doing things. Can it get over that type of posture? Because it will have to if it wants to deal with the Trump administration.

So, yeah, in terms of the deal itself, it relieves some things for the U.S. It allows the U.S. defense contractors in particular to import Rolls-Royce engines with 0% tariffs, which was a boon to that stock. There's still, however, the 10% tariff on most products, but other ones, important industries that were accepted from that are 0% tariffs on steel and aluminum.

And the auto tariffs will be reduced to only the 10% baseline for the first 100,000 cars. So Aston Martin enjoying that particular news item. And for the U.S. side as well, it was important, the U.K. airline. I didn't see which one, but I saw just say a U.K. airline ordering $10 billion worth of Boeing airplanes. And look at Boeing stock. It is now above 190 to multi-month highs from the lows below 130.

the Liberation Day tariff announcement. So with 2020 hindsight, you could say, well, U.S. trade war bad for U.S. companies, or should we have thought, well, U.S. Trump administration is going to strong arm in these deals, strong arm countries to buy Boeing planes, therefore good for Boeing. That's the way it's shaking out at the moment anyway, and pretty impressive move in that stock.

On the UK side, it had to agree to 0% tariffs on US beef and ethanol. The ethanol tariffs were at 19% before. And then some kind of a general market access rules for US products. Not a lot of specifics there. There's still some uncertainties around pharma.

And regulatory issues like agricultural standards, dodgy U.S. beef with all the hormones it uses, et cetera, that maybe have to be settled down the line, as well as that very contentious digital services issue that the EU is also going to be struggling with in these negotiations with the U.S. So again, really critical levels we're at. We've seen some interesting earnings reports this week as well. I saw Disney really getting a huge boost on that announcement of Abu Dhabi building it a free facility.

theme park in Abu Dhabi, clearly to attract more tourism there. It doesn't, we won't see what the split is in terms of the revenues from the park, but that's a boon to Disney as well as its strong results. And then Google, and we've mentioned it here several times in the podcast, scratching our heads at why,

you know, or what the impact would be eventually to Google from the disruption from AI, especially the amount of time we're all spending on chat GPT and perplexity. Our eyeballs are there in terms of the search and in terms of, you know, where our time is spent online.

And that eventually is going to take away from Google's ad revenue. So the specific announcement from Apple about searches on Google falling really tanked that stock a couple days ago. Now, in terms of the setting here, we're setting the table for the weekend. Really critical timing here. We have these weekend talks set to kick off between the US and China over the weekend. And those are going to be the most difficult talks of all. So if we're expecting to see some awesome headlines over the weekend, we're going to

I'd be very surprised if we do. We have even just, if you look at the South Korean and Japanese negotiations with the U.S., Commerce Secretary Lutnick out warning that these are going to take a long time. And we're talking about two countries that are, of course, have massive and critical and even larger trade relationship with China than they do with the U.S., but they're also extremely reliant on the U.S. as a security and defense ally. So

We're having a hard time between those two countries in the U.S. Imagine the state of the negotiations between the U.S. and China, which are obviously global rivals, and I would say rivals is the most polite term you can use to describe that relationship.

And some interesting news overnight, also on the trade front, China exports rose 8.1% in April year on year. This despite, of course, the U.S. tariffs going into effect and the volumes dropping from March into the U.S. exports from China into the U.S., 17.6%, which means they had to have gone up considerably elsewhere. And that's a big theme. We've seen several articles on that sort of trend.

The EU is going to be awash in Chinese exports and the rest of the world as well if it wants to maintain its export engine. All right, let's look across at other markets. One thing that's been pretty remarkable lately has been crypto, well back above 100,000. It was certainly a leading indicator, as we've talked about before, of very strong risk sentiment across the board and led a lot of this advance in the equity market higher.

And is one, probably one market that gives me a little bit of pause and wanting to get too bearish. It really is the last, and bearish I'm talking about on equities. It really is the last legs here for the bears. If bears can't make a stand here, they're going to be stuck in a long walk in the desert here. So let's see what crypto does over the weekend or even today. If it continues to provide that sort of momentum.

backstop in terms of sentiment and sort of a leading edge indicator on where sentiment is headed. And I think I'll wrap it up today with some thoughts on FX. And it's a very similar set of circumstances there together with broad risk appetite. So the dollar coming back as a function of, hooray, trade deals, hooray, normalcy, and hooray, we're out of this bear market risk. So your dollar tipping all the way down towards $1.12.

It really is a critical support area there. Bears need to take a stand as well. I've argued that sort of the last-ditch medium-term level is more like 110-50, but 112 is very important. Remember that 2024 high was just above 112, and these round numbers are important. So if we get a nice lift and back towards 113...

That's a good step for the solidifying that we're in a near-term low here near dollar. Similarly, dollar/yen, it squeezed all the way above 146, but shied away from that 146.50 plus resistance level. That was a major low on the way down in March. Also a key level there because above that, if it's rising above that, we're talking about 150, arguably, plus before there's meaningful resistance on the chart.

So those are the two really keys for the U.S. dollar. Elsewhere, sterling not very volatile on the Bank of England, which did see the two hawkish dissenters that did not want to see a rate cut. There were also two dovish dissenters that wanted a larger cut. The guidance was cautious but not particularly interesting for the currency.

And EUR-STERLING is stuck around 84.50 to 85 on the charts there. EUR-STERLING, I think the key one there, that's a really critical pivotal level to whether EUR-STERLING will drop into the lower range. I think STERLING has been very much impacted by risk sentiment. So let's recall Liberation Day and when risk blew up to the downside, STERLING did so likewise. So if we're back in for a significant risk off turn,

And a re-strengthening of the euro. Euro sterling may go higher. It means cable. So sterling versus the dollar may be a little bit less interesting. Certainly not getting a whole lot either out of this US-UK trade deal. It's more of a checkbox, it seems, for the currency.

All right. We'll have an interesting week ahead. I don't need to preview a lot of it because hopefully I'll be back early next week to discuss it. But, you know, U.S. CPI and retail sales are next week on the calendar. Some more interesting companies reporting. I think Walmart will be very interesting next Thursday for a read on the U.S. consumer and retail sales as well. And we'll, of course, cover that and lots more when we return next week with the Saxon Market Call. Have a wonderful weekend and stay careful out there.